During the development of the nervous system, the regulation of mitosis in neuronal precursors must be coordinated with their differentiation. A genetic analysis of cell cycle regulation is being pursued in a model system, the developing eye of Drosophila melanogaster. In the eye imaginal disc of the third instar larva, photoreceptor cell precursors differentiate in the wake of the morphogenetic furrow. Developmental decisions affecting cell cycle regulation likely occur among retinal precursor cells immediately anterior to the furrow. The transient expression ahead of the furrow of the sting (stg) gene, the fly homolog of the yeast cell cycle regulator cdc25, and the ubiquitous expression of other general cell cycle control genes (cdc2, cyclins) suggest that the establishment of the stg domain may be a rate limiting step in eye development. The dominant small eye mutant, Drop (Dr) has identified a novel gene required for cell cycle regulation during eye development. Based on genetic interactions with mutations in other known cell cycle components, Drop likely functions as an upstream activator of stg. Development analysis of both gain of function and loss of function phenotypes of Dr mutants suggests that the primary defects in cell cycle regulation occurs in imaginal cells. Homozygous Dr null mutant embryos are lethal, but exhibit no gross morphological defects, and have normal patterns of cell proliferation and stg RNA expression. In contrast, in the eye imaginal disc of a dominant gain of function Dr mutant, the expression of stg RNA in progenitor cells anterior to the morphogenetic furrow is blocked. The absence of stg expression is associated with the failure of morphogenetic furrow movement and lack of photoreceptor cell differentiation. DNA lesions associated with gain of function and loss of function Dr mutations have been localized to an 80 kb chromosomal walk from the distal 99A region of the third chromosome. Northern blot analysis and cDNA library screening have identified three transcripts within the cloned DNA. Experiments are currently in progress to determine which of the three transcripts corresponds to the Drop gene.